The short answer is yes – with some caveats.
Employers like to provide health insurance to their employees. Group health insurance plans are very popular amongst larger businesses as a way to attract and retain top employees. But what about businesses that offer “health insurance” by simply reimbursing employees for their individual health insurance premiums?
What is a Health Insurance Reimbursement plan/arrangement?
These types of employer payment arrangements is a popular way for smaller employers to provide some cost-effective health coverage to their employees without going through the hassle of setting up a full health insurance plan. This setup is also more flexible because it allows employees to pick their own plans tailored to their own needs.
Market reforms under the Affordable Care Act
However, the Affordable Care Act (ACA) signed into law in 2013 introduced new market reforms that penalize employers for offering plans that just reimburse employees for the premiums they pay for individual health insurance. Employers offering these reimbursement plans can be fined $100/day per employee – that works out to $36,500 per employee per year!
But businesses employing fewer than 50 full-time employees are exempt from having to provide employees with group health coverage under the ACA. And with reimbursement-style plans now unavailable, many employees working for small businesses were left without coverage.
What is the Qualified Small Employer Health Reimbursement Arrangement?
In 2017, this all changed for the better when the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) was introduced through the 21st Century Cures Act. This new law reclassified reimbursement plans so they were no longer considered group health plans – making them exempt from the market reforms of the ACA.
In order for reimbursements to qualify, they must meet these 4 requirements:
- The employer must fund all reimbursements without employee contributions
- Reimbursements are limited to $4,950/year per employee or $10,000/year for family coverage
- All eligible employees must get the same terms
- The employer cannot also offer a group health plan at the same time
Find out more
For those who want to learn more about the Qualified Small Employer Health Reimbursement Arrangement, you can read about it in this brief FAQ.